Goldman Sachs' Commodity Research has stated that the extension of voluntary supply cuts by Saudi Arabia and Russia is driving their forecasts for crude oil prices upward and enhances the likelihood of Brent crude reaching $107 per barrel next year. On Tuesday, Saudi Arabia and Russia extended voluntary cuts until the end of 2023, pushing oil prices above $90 per barrel, with Brent crude reaching approximately $90.97 by 1822 GMT. Saudi reductions are set at one million barrels per day, while Russian cuts are at 300,000 barrels per day. These cuts add to those announced in April by several OPEC+ producers, which will continue until the end of 2024.
In a note dated Tuesday, Goldman Sachs indicated that the first scenario it laid out includes a shortage of nearly 500,000 barrels per day compared to its own estimates for Saudi production in the fourth quarter, meaning prices could rise by $2 per barrel above its December 2023 forecast of $86 per barrel. In the second scenario, which involves nine OPEC+ countries not canceling half of the 1.7 million barrels per day in production cuts announced in April, Brent prices could reach $107 by December 2024.
The bank noted that the extension reflects OPEC+'s "robust use of its unusually high pricing power" and also suggests that OPEC+ is unlikely to rush to increase production, while a potential sale of an additional stake in Saudi Aramco could incentivize Riyadh to leverage its pricing power.
